After the 2012 European Grand Prix in Valencia, the European Grand Prix was absent on the calendar three times consecutively, while the Korean Grand Prix was removed from the calendar in 2014 despite its seven-year contract starting from 2010. Following this, Bernie Ecclestone decided to find a different Grand Prix to take its place,[5][6] which it would result in the European Grand Prix returning to the calendar and be held in Baku, Azerbaijan.[2]

Following its final inspection in May 2016, the FIA race director Charlie Whiting confirmed that the circuit was ready to be used.[7] However, the drivers criticised the circuit for some corners having run-off plus the pit entry being tight and located on a fast part of the track.[8] During free practice, there were problems where parts of the kerbs became loose. In response, the kerbs at Turns 6 and 12 were replaced with markings, plus the apex kerbs at the pit exit's curve. Additionally, following the drivers' concerns about the pit entry having a tight corner and the white line not being visible at a fast speed, the pit entry was extended and moved to the left part of the track along with a "pit entry" marking displayed on the track. To improve safety, a rule was given out to not cross the white line in any direction, meaning that drivers must keep away from the white line if they are not going into the pits.[9][10]

In the two previous races in Monaco and Canada, the drivers used the ultrasoft tyres, as those are allowed to be used on a street circuit.[11] Although the Baku City Circuit is a street circuit, Pirelli decided not to have ultrasoft tyres used in the race,[12] because they could not get any more information since the circuit was being used for the first time, meaning they were not sure if the ultrasoft tyres were safe on the circuit.[13] They allowed the medium, soft and supersoft tyres to be used in the race, where all the drivers decided to use around seven sets of supersoft tyres each, and only one or two sets of mediums each.[14] Pirelli were also worried about if the long straights and drivers changing direction could cause "standing waves" when going on a set of tyres for a longer distance, where the energy coming through the wheels can change the tyres' build, which could result in the tyres not being stiff and more likely to fail.[15] There were even concerns about that the temporarily surface that was put above the cobblestones in the Old City section could put impact onto the tyres, as well as if the surface could be broken up by high temparatures.[15] After the first practice session, it was discovered that the loose bolts on the kerbs were also affecting the tyres, which resulted in race officials solving the issue.[16] On 17 June 2016, Pirelli confirmed they extended their deal to support tyres for the Formula One teams until the end of 2019.[17]

Two DRS zones are located on the circuit: one on the start/finish straight, and the other on the straight between Turns 2 and 3.[18]

Also occurring that weekend was the third race of the 2016 GP2 Series.[19]

After the European Grand Prix was announced back in 2014, controversy was sparked by the fact that the Azerbaijani government gave financial support to the race despite Azerbaijan's human rights record.[20] At the same time, the Russian Grand Prix was also given financial support, while Russia was thought to be involved in an incident in Ukraine.[21] The heads of Red Bull and Mercedes, Christian Horner and Toto Wolff, replied by advising not to have any political issues close to sport.[22] on 7 June 2016, Ecclestone was reached out by an organisation called Sport for Rights, as they wanted him to talk about the country's human rights, while saying that they were not demanding the race to be cancelled, but instead to send the issues out in public.[23]

The date of the race was also controversial, due to the fact that the 24 Hours of Le Mans was on the same date, which meant that Nico Hülkenberg, who won the 24 Hours of Le Mans in 2015, could not compete in the 2016 Le Mans race.[24] Following this, Azerbaijan made a decision to no longer use daylight saving time in their country, in an attempt to have the European Grand Prix and 2016 Le Mans start at different times.[25]

After being knocked out in Q2, Alonso revealed that he and Button could not match the speed of the midfield due to the long start/finish straight: "The car works in the corners, but on the straight we are losing seven or eight tenths. On full throttle and with the steering wheel straight we are losing all that. It's frustrating but it's not something we didn't know when we arrived here. The lack of power is obvious and on circuits like this we try to make do, especially in the race with other cars. It will be hard but hopefully we can score some points. We have seen a lot of offs and a lot of accidents so it's all to play for. We have to stay on track and at any point you can find yourself in sixth or seventh with a bit of luck."[29]

Verstappen was left unhappy following the two overtakes Bottas had on him during qualifying, stating them to be "dangerous" and "unnecessary", plus ruining both their laps.[30] Bottas, meanwhile, said: "I thought, and the team thought, that Verstappen was on a double out lap, as they had been doing all weekend. I got the confirmation of that myself when exiting Turn 16. I saw his ERS lights flashing, so he was not in the [engine] mode yet. I was trying to get a good gap so I could get a nice slipstream to the lap and open the lap, but then he pulled away in Turn 19. So I found out at Turn 19/20 that maybe he was going for the lap and at that place you cannot back off any more as you lose all the straight line speed. So I thought the only option for me was to try to overtake. But it ruined his lap but also my lap. I got some dirt on my tyres and I don't even call that a lap – there was a lap time on the board that put me for P8. Then the second run I had the red flag with Lewis [Hamilton]. I went out again after the red flag, but I don't think the lap would have been mega. I felt with the tyres we lost quite a bit of temperature with the red flag, and there was just a bit of traffic. Everyone was trying to gain a track position and opening the lap I knew there was probably not much time left, so I didn't have time to leave a proper gap to Verstappen. Again I saw my only opportunity was to try to fight for the track position and try to overtake, but I couldn't do it again. Again it ruined my lap and his lap. I think it was really unlucky – and I was driven into really difficult decisions and situations today. Not my day at all.[31]

Hamilton declared that there was nothing wrong with his car when he hit the wall during Q3: "The car was good. It was me - I just wasn't on it. I wasn't hitting apexes; wasn't hitting the right braking zones. These kinds of days come and go, and you just have to take the rough with the smooth. I just have to get as high as possible. I'll do what I can. I highly doubt I can win the race; my job is just to try and get through the big tangle of cars I have in front of me." His teammate Rosberg stated there would still be a chance of Hamilton battling him for the lead: "Lewis, never forget him. He can always come back from tenth. I'm sure the race will be very exciting - it's one of the easiest circuits to overtake on, so there is going to be a lot of changing places..."[32] He was also given permission to have his front-left tyre from Q2 changed, since it was damaged from its lockup.[33]

Following the race, both Hamilton and Mercedes explained that both his and Rosberg's cars were not on the right energy deployment settings thanks to a mishap on Friday. Rosberg was able to fix the issue right away after it occurred on him during one point in the race, while Hamilton received the issue at the start of the race and struggled to find the correct settings himself due to the new restriction rules of 2016 having banned his team from telling him which was the correct setting. By the time he got onto the right setting, he noticed he did not have enough laps to catch up to the leaders, so Hamilton just focused on saving the engine.[38][39][40][41][42][43]